The Bangalore-based microfinance institution, riding on an approval from the RBI to start a Small Finance Bank is opening its IPO tomorrow with a price tag of Rs.207 to 210 range, compared to Equitas IPO priced between Rs.101 to 110.
While Equita was oversubscribed instantly, Ujjivan IPO may see how the market reacts to the pricing. Otherwise, market research firms such as Choice Broking recommended "SUBSCRIBE" to the IPO in its research report.
Ujjivan Microfinance or Ujjivan Financial Services Ltd. (UFSL) that started operations in 2005 as an NBFC to provide small-ticket loans to unbanked and rural poor households who were not served by traditional big banks.
Its business model is based on the joint group lending model and it gave away collateral free loans. Its journey was smooth except for a brief period of delinquency in 2009, which hit the microfinance industry severely in Mysore and other regions, triggered by Andhra Pradesh suicidal deaths.
Ujjivan will use the IPO proceeds to increase its capital base and upgrade its future capital requirements and competitive strengths. It was third largest NBFC-MFI in India in terms of loans disbursed and largest MFI in terms of geographical spread.
With its Risk Management Framework in place, driven by technology driven operational efficiency, the MFI had a professional touch to its banking model. Its market share at 11.2% in NBFC-MFI with a significant presence in 24 states with 470 branches is another eye-cathing feature. Over a period of time, it has made its portfolio not affected by one state or region’s busines risk.
To be closed on May 2, the IPO comprises fresh issuance of shares worth Rs. 358.16 crore and an offer for sale of up to 2,49,68,332 shares by the existing shareholders. Its current foreign investors — Mauritius Unitus Corporation (2.49 per cent), WCP Holdings III (3.06 per cent) and Women’s World Banking Capital Partners (5.34 per cent) — are offloading their entire equity with the IPO.
“Out of the Rs. 885-crore IPO, the company will garner Rs. 358 crore from fresh capital and the balance is a secondary transaction through an OFS by the existing foreign shareholders who will be exiting,” said Ujjivan Chief Financial Officer Sudha Suresh.
The new compliance with RBI shareholding pattern allows only 45% of the stake to be held by foreign shareholders. After the IPO, Ujji9van’s foreign holding will come down to 45% from the current 77%.
The pre-IPO placement generated Rs. 292 crore already. The Ujjivn Bank is likely to open in the first quarter of 2017.